An Excursion into the Statistical Properties of Hedge Fund Returns

Kat, Harry M.; Lu, Sa

doi:10.2139/ssrn.310227

Cited by 53 publications

(31 citation statements)

References 5 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, the degree of asymmetry and fat tails is quite different among hedge funds. These results are similar to those reported in [1,2,13] obtained using different hedge fund indices and in [26] obtained employing CS/T indices on a shorter time period. Negative skewness and excess kurtosis are due to hedge funds' use of derivatives, leverage and short selling.…”

Section: Statistical Properties Of Hedge Fund Returnssupporting

confidence: 91%

“…The last column reports P-values of Ljung-Box statistic test for the joint relevance of autocorrelations up to order twelve. As already noted in [5,13], also in our sample, Convertible Arbitrage and ED Distressed indices seem to be among the most affected by first order and general serial correlation.…”

Section: Statistical Properties Of Hedge Fund Returnssupporting

confidence: 85%

“…The positive first order autocorrelation is a typical characteristic of empirical hedge fund returns and appears incoherent with the market efficiency hypothesis. According to [5,13] an explanation consists in the difficulty for hedge fund managers to get updated valuations of their positions in illiquid overthe-counter securities. To face this problem, hedge fund managers usually employ the last reported transaction value to estimate the current market price.…”

Section: Statistical Properties Of Hedge Fund Returnsmentioning

confidence: 99%

“…This would explain why the different convertible arbitrage and distressed indices, employed in their work, show the most significant serial correlation. According to [5,13] a possible approach to mitigate the effect of this autocorrelation can be taken from the real estate finance literature. The returns of property investment indices are autocorrelated and this is caused by infrequent valuations and smoothing in appraisal.…”

Section: Statistical Properties Of Hedge Fund Returnsmentioning

confidence: 99%

See 3 more Smart Citations

Pricing equity and debt tranches of collateralized funds of hedge fund obligations: An approach based on stochastic time change and Esscher-transformed martingale measure

Tassinari

Corradi

2013

Quantitative Finance

View full text Add to dashboard Cite

Abstract. Collateralized Funds of Hedge Fund Obligations (CFOs) are relatively recent structured finance products linked to the performance of underlying funds of hedge funds. The capital structure of a CFO is similar to traditional Collateralized Debt Obligations (CDOs), meaning that investors are offered different rated notes and equity interest. CFOs are structured as arbitrage market value CDOs. The fund of funds manager actively manages the fund to maximize total return while limiting price volatility within the guidelines of the structure. The aim of this paper is to provide a useful framework to evaluate Collateralized Funds of Hedge Fund Obligations, that is pricing the equity and the debt tranches of a CFO. The basic idea is to evaluate each CFO liability as an option written on the underlying pool of hedge funds. The value of every tranche depends on the evolution of the collateral portfolio during the life of the contract. Care is taken to distinguish between the fund of hedge funds and its underlying hedge funds, each of which is itself a portfolio of various securities, debt instruments and financial contracts. The proposed model incorporates skewness, excess-kurtosis and is able to capture more complex dependence structures among hedge fund log-returns than the mere correlation matrix. With this model it is possible to describe the impact of an equivalent change of probability measure not only on the marginal processes but also on the underlying dependence structure among hedge funds.

show abstract

Section: Statistical Properties Of Hedge Fund Returnssupporting

confidence: 91%

Section: Statistical Properties Of Hedge Fund Returnssupporting

confidence: 85%

Section: Statistical Properties Of Hedge Fund Returnsmentioning

confidence: 99%

Section: Statistical Properties Of Hedge Fund Returnsmentioning

confidence: 99%

See 2 more Smart Citations

Pricing equity and debt tranches of collateralized funds of hedge fund obligations: An approach based on stochastic time change and Esscher-transformed martingale measure

Tassinari

Corradi

2013

Quantitative Finance

View full text Add to dashboard Cite

show abstract

“…10 To correct autocorrelation of degree one, a method presented in Kat and Lu (2002) can be applied. We use this method in robustness tests.…”

Section: Notesmentioning

confidence: 99%

Factors that affect the performance of distressed securities hedge funds

Bontschev¹,

Eling

2013

J Deriv Hedge Funds

View full text Add to dashboard Cite

We present a four factor model to replicate distressed securities hedge fund returns. The model considers the returns of short put options, a short straddle on bonds, the spread between high yield and Treasury bonds, and stocks with small market capitalization. On the basis of this model, we conduct a multivariate analysis of how fund characteristics affect risk-adjusted performance. A high-water mark and performance-based compensation are positively related to risk-adjusted performance, which is in line with much of the hedge fund literature. In contrast to other work, however, we find that lock-up is negatively related to performance and that fund age is unrelated to performance. Our work provides a better understanding of the nature and critical factors for the success of distressed securities hedge funds.

show abstract

References

2013

Strategic Risk Management

View full text Add to dashboard Cite

An Excursion into the Statistical Properties of Hedge Fund Returns

Cited by 53 publications

References 5 publications

Pricing equity and debt tranches of collateralized funds of hedge fund obligations: An approach based on stochastic time change and Esscher-transformed martingale measure

Pricing equity and debt tranches of collateralized funds of hedge fund obligations: An approach based on stochastic time change and Esscher-transformed martingale measure

Factors that affect the performance of distressed securities hedge funds

References

Contact Info

Product

Resources

About